SAP America, Inc. v. David Gerregano, Commissioner of Revenue, State of Tennessee

The Tennessee Department of Revenue issued a business tax assessment against a companybased on the company’s gross receipts from sales of computer software, cloud hosting, and cloud-based services.The company challenged the assessment by filing a complaint in the chancery court. Both parties filed motions for summary judgment. The court granted summaryjudgmentto the company, finding that the sales of computer software and cloud hosting were not subject to business tax. The court upheld the Tennessee Department of Revenue’s assessment of business tax against the company’s sales of cloud-based services. Lastly, the courtfound that the company was the prevailing party and awarded the company attorney’s fees pursuant to Tenn. Code Ann. § 67-1-1803(d). The Tennessee Department of Revenue appealed. Discerning that the court erred in its determination that the company’s cloud hosting sales were not subject to business tax, we reverse that portion of the court’s decision. Because this affects the attorney’s fees award, we vacate the award of attorney’s fees and remand for further proceedings. We affirm the trial court in all other respects.